8 things to consider before opening a store credit card this holiday season

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Make sure a store card is right for you first.


Key points

  • Many stores promote in-store credit cards that allow frequent shoppers to earn rewards.
  • Not all store credit cards are created equal, so it’s important to research whether a particular card will meet your needs and provide value.
  • Consider the welcome offer, rewards redemption, and card holding costs before signing up.

Now that the holidays are approaching, you may be shopping more than usual. While shopping, you may be asked if you want to open a store credit card to save money and earn rewards. Before adding a new credit card to your wallet, you need to think about this decision carefully. Here’s what to consider before opening a store credit card this holiday season.

1. The value of the welcome offer

Usually, retailers entice shoppers to sign up for their store cards by promoting a welcome offer. Typically, this is a one-time discount on your first order when you sign up for the card and are approved. However, the welcome offer is not always substantial.

Say you’re about to spend $100 and a potential store credit card offers a 10% welcome offer on your first order. You’ll have to decide if a $10 cashback is worth opening a new credit account.

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2. How rewards are earned

You should also review how you will earn rewards with the card. You will likely only earn rewards when you shop at that particular store or other stores that are part of the same brand network. Determine what the rewards rate is and how the card earns rewards so you can calculate the rewards potential.

3. Your repayment options

It may be beneficial to research what your redemption options are. Will you earn money in the form of statement credit, or can you redeem your rewards in another way? Most store credit cards have limited redemption options, unlike other credit cards on the market.

4. If the card promises other benefits

Besides earning rewards for spending money at a specific store, are there any other benefits offered with this card? Some store credit cards don’t have the extra benefits that other rewards credit cards often offer. If you’re hoping for benefits like purchase protection or extended warranty, you’ll probably want to apply for a different type of credit card.

5. Know the credit card interest rate

Credit card interest can be expensive and adds up quickly if you let credit card debt pile up. Paying off your credit card balance in full is a great way to avoid paying interest.

But it’s always a good idea to research the annual percentage rate (APR) or store card interest rate to understand what kind of interest you’ll be charged if you carry a balance on the card. If the card advertises a 0% interest rate, it’s probably only available for a limited time.

6. If you will be charged an annual fee

Some store credit cards don’t have an annual fee, but that’s not true for all store cards. Make sure you know if there are annual fees before getting a new card. If there is an annual fee, consider whether the annual fee is worth it for the potential rewards and benefits offered.

7. If you can use the credit card in other stores

Most store credit cards are closed-loop, meaning you can only use them at the retailer that issues the card. But some cards are open-loop, meaning you can use them anywhere the credit card network, like Visa or Mastercard, is accepted. Knowing this before choosing a card will allow you to get the most out of your new card and can save you from disappointment.

Finally, it’s a good idea to consider your buying and spending habits. Do you shop at the store often enough to make the card earnings worth it? It might not make sense to open a store card if you’re an occasional shopper, especially if you have to pay an annual fee. But for frequent shoppers, opening a card can be a good option.

Are store credit cards worth it? Only you can decide. Some store credit cards are more valuable than others. The above considerations can help you decide if the benefits of a particular store credit card meet your needs and match your financial goals.

Check out our list of the best store credit cards to learn more about your card options.

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